A corollary to this question is whether the economic crisis will change the calculus of what kinds of energy projects receive financing, and whether that could significantly change the energy mix. Renewable energy projects, as well as capture and storage projects for coal-fired power generation, face a unique set of circumstances and challenges.

Renewable energy has seen robust expansion in the past several years. New wind and solar generation capacity in the U.S. have each increased over ten-fold in the last decade. This impressive growth is—by and large—not due to an increase in market demand for renewable energy. Instead, it is primarily driven by policy interventions, particularly the federal renewable energy production tax credit (PTC) investment tax credit (ITC), and state-level renewable portfolio standards. In a slowing economy where electricity demand may weaken, that may be encouraging news for renewable energy projects. So long as state and federal incentives continue, then renewable energy projects could enjoy a comparative advantage when competing for capital financing.

Perhaps as relevant, given our policy interests in shoring up national economic performance, studies have shown that green energy policies can offer significant gains. California’s energy-efficiency policies created nearly 1.5 million jobs over 30 years, while eliminating less than 25,000, and saved consumers $56 billion in energy expenditures. As long as a compelling link is made between jobs and energy, look for political support for renewable energy projects to continue.

That said, recent market behavior will no doubt diminish near term interest in new energy investments, including for renewable energy. The New York Times is already reporting weakening of capital financing for alternative energy projects as the pool of investment capital contracts. But unlike the mortgage industry, the majority of energy projects competing for capital are fundamentally sound. The real question is whether the investment retreat is a new long-term reality, or a short-term phenomenon that will dissipate once the market crisis has receded, and liquidity is restored.

During this period, the most vulnerable renewable energy and energy efficiency technologies are those in early stages of development that are not yet viable on a large scale. The problem for these technologies is what venture capitalists call the “Valley of Death;” that is, the period where early-stage technologies often fail because they lack the funding to go from laboratory to marketplace. In the near-term, if the investment pool dries up, it will likely be these early stage, yet promising technologies—such as enhanced geothermal, advanced solar thermal, or new innovative grid management technologies—that will suffer.

However, over the longer term, it is not plausible that energy demand will fall. Global electrification and development, particularly in India and China, will drive demand – and new expectations for environmental performance will simultaneously and increasingly require that the supply is green.